Question

6) Sharon Marsh just graduated. She plans to work for five years and then leave for the Australian "Outback" Country for an extended vacation. She figures she can save $3,500 at the end of each of the first three years and $5,000 at the end of each of two years after. Her family also gave her a graduation gift today of $2,500. Sharon sets up a savings account that offers her an APR of 7.75% which compounds annually. What is her bank account worth at the end of the fifth year before she heads to Australia? (try using the NFV on the calculator)

Explain your work

Answer 1

FV factor @ Year 7.75% Cash flow Future Value A B AxB 0 1.4524 $ 2,500 $ 3,631.00 1 1.3479 $ 3,500 $ 4,717.77 2 1.2510 $ 3,500 $ 4,378.44 3 1.1610 $ 3,500 $ 4,063.52 4 1.0775 $ 5,000 $ 5,387.50 5 1.0000 $ 5,000 $ 5,000.00 Amount at the end of 5th year: $ 27,178.24

Hope it helps , In case of any doubts or issues, please do comment below